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The most you can lose on any stock (assuming you don’t use leverage) is 100% of your money. But if you pick the right stock, you can make a lot more than 100%. For example, the Nahar Spinning Mills Ltd (NSE:NAHARSPING) share price has soared 263% in the last year. Most would be very happy with that, especially in just one year! Also pleasing for shareholders was the 16% gain in the last three months. But this move may well have been assisted by the reasonably buoyant market (up 6.7% in 90 days). However, the longer term returns haven’t been so impressive, with the stock up just 7.7% in the last three years.
Check out our latest analysis for Nahar Spinning Mills
Nahar Spinning Mills wasn’t profitable in the last twelve months, it is unlikely we’ll see a strong correlation between its share price and its earnings per share (EPS). Arguably revenue is our next best option. Shareholders of unprofitable companies usually expect strong revenue growth. As you can imagine, fast revenue growth, when maintained, often leads to fast profit growth.
In the last year Nahar Spinning Mills saw its revenue shrink by 8.4%. So we would not have expected the share price to rise 263%. This is a good example of how buyers can push up prices even before the fundamental metrics show much growth. Of course, it could be that the market expected this revenue drop.
The graphic below depicts how earnings and revenue have changed over time (unveil the exact values by clicking on the image).
It’s good to see that there was some significant insider buying in the last three months. That’s a positive. On the other hand, we think the revenue and earnings trends are much more meaningful measures of the business. Before buying or selling a stock, we always recommend a close examination of historic growth trends, available here..
A Different Perspective
We’re pleased to report that Nahar Spinning Mills shareholders have received a total shareholder return of 263% over one year. Since the one-year TSR is better than the five-year TSR (the latter coming in at 1.4% per year), it would seem that the stock’s performance has improved in recent times. In the best case scenario, this may hint at some real business momentum, implying that now could be a great time to delve deeper. I find it very interesting to look at share price over the long term as a proxy for business performance. But to truly gain insight, we need to consider other information, too. Consider for instance, the ever-present spectre of investment risk. We’ve identified 4 warning signs with Nahar Spinning Mills (at least 2 which can’t be ignored) , and understanding them should be part of your investment process.
There are plenty of other companies that have insiders buying up shares. You probably do not want to miss this free list of growing companies that insiders are buying.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on IN exchanges.
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This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
*Interactive Brokers Rated Lowest Cost Broker by StockBrokers.com Annual Online Review 2020
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